HEAD OFFICE, MONTREAL, MARCH, 1948

ETHICS IN BUSINESS

BECAUSE it goes to the very heart of human nature,the question of right and wrong is not a simplesubject. But since it is so important to the well-

being of individuals, social communities, and thenation, it is well worth a little thought.

From the very beginning of things, there have beenobligations arising out of social contacts. The fourthchapter of the Bible’s first book puts on record amomentous question: "Am I my brother’s keeper?"Today’s viewpoint is that every man has a certaanresponsibility toward others.

When we narrow this down to the morals of busi-ness, we find that the spirit finds expression throughfair play, honourable dealing, and keeping one’sword.

Most business men have a solemn feeling of theirobligation to maintain honour in the business world.They are men who recognize the importance of thesquare deal as part of creative industry.

In recent years a new sense of community obligationhas been added to old ideas of personal goodness.

What Ethics Is

"Ethics" comes from a Greek word meaning "cus-tom". Today, it means the philosophy of goodness,and as a science it seeks to determine the differencebetween right and wrong conduct. Some personslook upon morals as being mainly negative, tellingwhat shall not be done, while ethics is looked uponas chiefly p.ositive, telling what ought to be donein certain circumstances.

Ethics takes notice of the lessons of the past, thedesires of other people, and the consequences ofactions. Some virtues are right because we think ofthem as right, without needing to analyse them. Inbusiness, most people respect carefulness, patience,intelligence, and initiative. In social life, people valueprudence, thoughtfulness and practice of the GoldenRule. Community life demands justice and lawfulness.

These are all virtues which contribute to the courseof human development, leading away from animalnature to the freedom of spiritual achievement.

One aspect of ethics is worthy of special attention.Ethics is a two-way affair, with equity as its strongtheme. In its broad meaning, equity denotes the spiritand the habit of fairness, justness and right dealing.The great emperor, Justinian, expressed it well whenhe said equity means "to live honestly, to harm no-body, to render to every man his due." The law saysthat one shall act in such-and-such a manner towardanother; equity says that both shall act equitably, orethically. A legal maxim lays down the rule that he whocomes to equity must come with clean hands.

Society Gives the Keynote

It is not enough to have a few persons act morallyin order that we may call the society an ethical society.The ethics of the individual and of the group must berelated to the ethical standards of the whole com-munity. Higher standards only become rules for con-duct when through education they have been acceptedas proper by a large or influential section of the people.

Business reflects pretty well the spirit of the com-munity in which it exists. It has been moulded bypopular sentiment. John Dewey remarked in hisHuman Nature and Conduct: "If the standard of moralsis low it is because the education given by the inter-action of the individual with his social environmentis defective."

Outside of theory, the chief test of a man’s conductis whether it will be approved or condemned bysociety. This is not a bad thing in itself. It is whole-some for anyone to know that thoughtless, self-cen-tred action on his part will expose him to the indigna-tion and dislike of others. Group disapproval willdiscourage reckless pursuit of self-interest, and theextent to which disapproval is shown depends uponthe standard to which the society has raised itself.

The higher the general standard is in society as awhole, so much higher will be conduct in business.Evidence of indifference by business men to principles

for which society stands will be visited with quick anddefinite punishment. Even-handed justice may be dis-pensed best by those who have nothing to pardon inthemselves, but so long as society must have allow-ances made for its own shortcomings, it is in no posi-tion to demand complete ethical purity in its individualmembers.

Ethics is Wider than Law

The subiect of ethics takes in much more thanmerely the punishment of acts which are wrong. Anethical man does not seek to justify himself by theplea that he keeps within the law. An act may be quitelawful and yet be immoral and unethical. "Ethics"means "what should be." It carries with it a certainfeeling of the "oughmess" of things.

"Every man takes care," said Ralph Waldo Emerson,"that his neighbour does not cheat him. But a daycomes when he begins to care that he does not cheat

his neighbour". Then he becomes ethical. In otherwords, the "ought" of ethics is not a command im-posed upon us from without, but an impulse arisingwithin us.

The business man of today has found that when allthings are averaged, the "ought" of his own mindcoincides with the success of his work. The real testof a man’s ethics comes in the twilight zone betweenwhat is clearly demanded by the tests of honesty, andwhat is required by that combination of feeling andjudgment which is the mark of a good business man.

Merely being legal will not bring customers back.Trade depends upon goodwill, in which legality isonly an ingredient. For custom the business man de-pends upon the judgment of buyers; for credit hedepends upon the reputation for integrity he haswith his banker; for his trade reputation he dependsupon the appraisal of those in the same line of busi-ness u and there are no more merciless appraisersof men and their worth than business competitors.

The duties of an ethical life were well summed up byFrank Crane in his popular book Just Human: "If oneis honest because honesty is the best policy he is nothonest at all, he is shrewd." This principle wascarried forward a step by Benjamin Franklin in hisAutobiography: "Wrong none by doing injuries, oromitting the benefits that are your duty."

Management has realized the need for this positiveapproach to ethics. Not so many years ago there weremanagers who believed that if they kept within thestrict letter of the law they should be immune frompublic or private attack. The crude devices of blameand punishment were the only measuring rods thesepersons acknowledged.

Ethics cannot be brought within the four walls ofthe ten commandments. "Law" and "Justice" do notcover all of "ethics." Ethics cannot be summed up in abody of rules and commandments which may beapplied always and everywhere without regard tocircumstances.

Everyone in business -- proprietor, manager, secre-tary and workman u must find within himself thetrue guide to how he shall fulfil the ethical trust thatrests upon him.

There are Practical Benefits

For those who are not inspired by high ideals, thereare practical and influential motives. Ethical manage-ment brings additional profits to business. It pays indollars and cents. The firm that establishes a reputationfor honesty and for fair dealing beyond the necessitiesof the law has a business asset of great value and profit.

In his annual address at the beginning of this year,tile General Manager of this Bank took occasion toremark: "We are glad to say that the quality ofCanadian merchandise and the straightforward deal-ing of Canadian traders have contributed greatly to-wards building an enviable reputation in WesternHemisphere countries." Mere shrewd trading does notaccomplish that. The old idea of a good bargain wasa transaction in which one man got the better ofanother: the new idea is of a transaction which is goodfor both pardes to it.

Legally, the buyer must still be on his guard to makesure he gets his money’s worth, but in practice therising standard of business ethics enables buyers ofalmost any article, even including horses, to findmarkets where they can place complete confidence inthe representations of the seller.

There is a strong hint here for business men. Theymust not be content with being ethical, but need tomake it known that they are ethical. An English LordChief Justice once remarked: "It is important thatjustice should be done: it is hardly less importantthat it should manifestly appear to be done." Thereare many examples. The physician who washes hishands in the presence of the patient is making hiscarefulness obvious. A more amusing illustrationcomes to us in Mutiny on the Bounty: The mess cookswere heard whistling as they seeded the raisins forduff, not because they were cheerful, but in order toprove that the raisins were not going into theirmouths. Says Benjamin Franklin: "I took care not onlyto be in reality industrious and frugal, but to avoid allappearances to the contrary."

Service Involves Ethics

There are hundreds of thousands of business menwhose idea of business ethics rises above profit-making. They are conscious of performing a necessaryand valuable service, and that service is, after all, thereason for their existence. A business man summed itup in this way: "Real service in business consists inmaking or selling merchandise of reliable quality forthe lowest practically possible price, provided thatmerchandise is made and sold under just conditions."

Only that business which has service as its objectivecan win the confidence of the public, and only thatbusiness which wins the goodwill of the public canrealize for any length of time the financial return whichmakes its existence possible.

Dealings between business men themselves hangmore and more upon good faith, and the reputation a iman gets that his word is as good as his bond is an iimportant asset. Sometimes one comes upon a man .,who relies upon the technical defence that he has not cbound himself in writing: there is no contract orlease. That may avail in a court of law, but not beforethe bar of business ethics. There is a strong feeling forfairness in business today, and the man who does notconform finds himself avoided, t

t

Is Business a ProJession? "~

Some persons dismiss the question about profes- fsional ethics for business by just saying "There’s ta difference." But do not the basic qualities of profes- !sionalism hold true for business? c

sThere is not yet the unity in business one sees in the

professions, but each business is working steadilytoward self-expression in the ethical field. Judged onthe basic requirements, the only difference between tbusiness and the professions is one of degree, not ofkind. t

i

The question has been asked, why make a difference i

between those who build a school and those who teach r

in it; between the supplier of food and the provider of (health? It’s all in the way you look at it. As R.H. t

Tawney, of Oxford, said in his book The AcquisitiveSociety, "The work of making boots or building a thouse is in itself no more degrading than that of curing tthe sick or teaching the ignorant. It is as necessaryand therefore as honourable." The man in business is e

as proud of having his work referred to as "a goodt

piece of work" as the lawyer is of hearing his briefcalled "a professional job." The Oxford Dictionary r

leaves the way open for business men, because it t

defines a profession as "the occupation which oneprofesses to be skilled in and to follow," a description a

which certainly includes business.

iOf course, some will say that business men are in y

business to make money, and that is not professional, iIt is true that a large income is incident to success in tbusiness, but he who exaggerates the value of the sincident is likely to fail of real success. Successful cconduct of business includes also excellence of per- iformance, continuous betterment of methods andprocesses, improvement of products, perfection of torganization between management and workers, andright relations with customers and the community.In all this there is the making of a profession, one cwhich can render great practical service and be noble cin action, s

PAbout "The Good Old Days" n

a

Reference is sometimes made by critics to events inthe past. It is not so easy as some think to judge thepast. The lawyer of today, for example, may find it edifficult to see the world as a business man or a poet dsees it: how much more difficult, then, for us to see cthe world of a century ago as men of that time looked aat it. P

In every age poets and social reformers have tried:o stimulate people to a nobler life by telling enchant-[ng stories of the virtues of heroes of old. These~tories are not borne out by history. Man is not harsh-.~r and harder than he was; he is not less willing to givelp his own happiness for the benefit of others in caseswhere the law leaves him free to choose.

Small communities with simple wants have foundheir needs supplied by nature, and have not beenempted to sordid ambitions. But where social re-;earchers have penetrated to the inner life of a crowd-.*d population under primitive conditions they have’ound more want, more narrowness, and more hard-less than could be seen from a distance. No onelonestly believes that any nation, in any past time,.wer had a more widely diffused comfort with less;uffering than exists in Canada today.

People are inclined to agree when one say.s the~,ays of commerce have changed, and they pont tohe growth of great industries, transportation systems,tnd commercial centres. This point of view overlookshe basic reason for change, which is the tremendousncrease in world population, frequently referred ton these Letters, from 1,009 million a hundred yearstgo to 2,151 million today. How could the old ways)f agriculture and production continue to serve allhese people?

The change means that the consumer is far out ofouch with the producer. Fewer products are made inhe home or community. Even if the variety were not:nough to confuse the consumer in making choices,here is the difficulty in comparing qualities and’alues. As a consequence, the consumer must relynore upon the good faith of the producer. Equallyrue, the producer must be alert to keep up his quality,~ecause if he doesn’t the falling off in his sales may be¯ decisive influence in closing down his business.

Manufacturing is a stabilized business with bignvestment. It produces goods for the same marketear after year, and it depends upon that market forts income. If business is done on the principle "lethe buyer beware" it is not likely to last long. Theeller is required by the very nature of today’s worldommerce to make his goods of such quality as tonsure the confidence of the buyer.

~thics in Competition

The high principles of square dealing apply even inompetition, though it is a fact that the unscrupulousonduct of a few may make it difficult for many in theame line of business to live up to their ideals. Com-,etition is a severe referee, and looks only at results,Lot at motives. The rewards for success are great,nd the penalty for failure is oblivion.

When competition is put on public trial, its accusersmphasize the bad forms it has sometimes taken, ando not bring out the fact that in most of its formsompetition is essential to the maintenance of energynd enterprise, and without these we should cease torogress.

It was in the days of greatest competition thatCanada and the United States were built out of thewilderness. No society will be found devoid of com-petitive elements, not even the most backward sur-viving tribe on earth. In highly civilized countries ithas been realized that certain restrictions are neces-sary, and these are applied by business itself, bygovernment, or through pacts and agreements.

Competition is not good or bad in itself. There isethical competition, toward which all men who havea high opinion of themselves and high hopes torsociety are working. Those who are unscrupulous arefinding it more difficult to maintain their place incommerce.

No man-made law can ever eradicate the basiccondition of human life, which is struggle. No man-made law has ever upset the judgment handed downin the Garden of Eden: ’In the sweat of thy face shaltthou eat bread." Whatever basis of working andsharing and distributing is worked out within asociety, there is no escape from rewarding some, themore energetic and effective producers of results,more highly than the less energetic and less effective.

Every Generation Advances

Every generation has seen an advance in the stand-ards people expect of their neighbours. Crude cheatingwas outlawed in civilized countries long ago;weights and measures must be accurate; food anddrugs must live up to a high standard of purity, andthe quality of goods must come up to the claims madefor them.

Every generation has made refinements. The mer-chant who misrepresents the quality of his goods,even though he keeps within the law, or advertisesbogus fire sales, is being relegated to the backstreets, while customers flock to the stores wherethey know they can depend upon ethical treatment.This mass approval of fair dealing, and the with-drawal of patronage from unethical dealers, has asteady effect upon the improvement of morals inbusiness.

Canadian Business High-minded

Business in Canada is keeping its own house clean.If you ask a business man what he looks for first in aprospective executive, he will reply at once "goodcharacter" or he will specify features which includegood character. The standards and conduct of busi-ness in this country have been rising steadily. Mis-conduct by a few may occasionally steal the newspaperheadlines, and bring discredit on the great majoritywho are doing business according to the law of theland and the law of their own consciences.

Business does not wait for others to make its morali-ties. It not only polices itself to a large extent, but itis constantly trying to set higher standards. Neverbefore was there such a keen feeling of the responsi-bility of corporations to stockholders, customers,employees and the public.

Business has set up organizations to help it extendand maintain its ethical standards. Nearly 40 yearsago Better Business Bureaus were organized by busi-ness men who realized that bad business practices notonly hurt business at once but threatened the healthof the Canadian system of business enterprise.

These bureaus, maintained by business to helpitself, its employees, its customers, and the wholecommunity to obtain maximum satisfaction fromcommercial dealings, have as their objectives: promoteand maintain advertising and selling practices fairto business and consumers alike; protect business andthe public from fraud and misrepresentation in busi-ness transactions; and provide educational help forthe consumer in his quest for full value for his money.Factual information is obtainable free from the Bu-reaRs.

Trade associations, too, are raising ethical stand-ards in business. These are organizations in whichbusiness men join together in the old guild spirit forcollective action looking toward improvement of theirbusiness and of their relations with the public. Theseassociations become professionally conscious, andset up standards of practice or codes of ethics basedupon the motive of service.

Codes are useful as reminders even to the mostethical of mortals, because history shows that ordinarymen are seldom capable of pure unselfis.hness for anyconsiderable time. There is assurance of progress insocial life when we look at the advancement made incodes of duty, ideals and responsibility. These codesdo more than laws could ever do. They are formu-lated by business men themselves, therefore they areworkable. They deal with fair trade practices uponwhich all subscribers to the code are agreed. Theyprotect contracts, prescribe honesty in advertising,set out the necessities of good labelling, and outlawcertain practices which are considered unfair or animposition on the public.

Progress is Made Quietly

This is a crucial point in human destiny. It is a timeto show the essential fairness of the Canadian way oflife. Defects will reveal themselves from time to time. . . the nearer we attain to perfection in one respect,the more defects in others are thrown into prominence.But as society and the community advance, so willbusiness hold itself increasingly accountable to thepublic, and responsive to the public trend.

Many self-appointed reformers who never engagedin business fail to see that changes are not wroughtby words and slogans but by thoughts and acts.Very few "reformers" know or admit the steadyethical evolution that is going on within business.As David F. Houston said in Readings in ModernBusiness Literature: "The world quietly turns overwhile the professional reformers are barking at themoon."

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